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ECB's macroeconomic outlook consistent with the success of QE

European Central Bank (ECB) President Mario Draghi laid out an outlook that is consistent with the success of QE without calling into question the commitment to QE. 

He clarified the technical feasibility of the program and explained the position relative to Greece.

BofA Merrill Lynch notes in a report on Monday:

  • We expected the ECB's midpoint for 2017 inflation to be slightly above 1.5%, but it is even closer than we thought to 2% (1.8%). The scenario for GDP growth is, in our view, quite optimistic, at 1.5% for this year (we are at 1.4%), 1.9% for 2016 (we are at 1.6%, and already above consensus) and 2.1% for 2017.
  • As we were expecting, Draghi made his optimistic macro scenario conditional on QE. This should be enough to put the concerns of the "doubters" - unsure of the capacity/willingness of the central bank to deliver on their pledge - at bay. 

  • We also consider that with these forecasts, Draghi has given himself considerable insurance against calls for an early end to QE if the cycle turned decisively up. 

  • Market Data
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